Maine Withholding: What you need to know

The Maine income tax law requires that employers withhold state income tax at each pay period from the wages of all resident employees and nonresident employees who are present in Maine performing personal services for more than 10 days during the taxable year in which the compensation is earned. The definition of employer and employee is the same for federal income tax purposes.

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Withholding applies to compensation paid by employers to employees including salary, bonus, vacation allowance, and commission. Maine generally applies federal law to determine whether withholding is required on fringe benefits such as deferred compensation plans and cafeteria plan contributions. Maine's income tax law conforms to the exclusion from federal gross income of employer-paid health insurance coverage for dependents under the age of 27.

Forms. New employees and employees changing their number of withholding allowances must provide their employer with Form W-4ME to designate the number of allowances for Maine income tax withholding. The number of allowances claimed on federal Form W-4 must be reduced by any allowances claimed for the federal child tax credit. An employee wishing to claim more allowances on Form W-4ME than on Form W-4 must obtain a Personal Withholding Allowance Variance Certificate from Maine Revenue Services.

An employer is required to submit a copy of Form W-4ME, along with a copy of any supporting information provided by the employee, to Maine Revenue Services if either of the following circumstances apply:

• The employer is required to submit a copy of federal Form W-4 to the Internal Revenue Service; or